Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

Forward-looking statements

This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains statements that are forward-looking statements within the
meaning of the federal securities laws. All statements that do not concern
historical facts are forward-looking statements and include, among other things,
statements about our expectations, beliefs, intentions and/or strategies for the
future. These forward-looking statements include statements regarding our future
operations, financial condition and prospects, expectations for treatment growth
rates, revenue per treatment, expense growth, levels of the provision for
uncollectible accounts receivable, operating income, cash flow, operating cash
flow, estimated tax rates, capital expenditures, the development of new dialysis
centers and dialysis center acquisitions, government and commercial payment
rates, revenue estimating risk and the impact of our level of indebtedness on
our financial performance, and including earnings per share. These statements
involve substantial known and unknown risks and uncertainties that could cause
our actual results to differ materially from those described in the
forward-looking statements, including but not limited to, risks resulting from
the concentration of profits generated by higher-paying commercial payor plans
for which there is continued downward pressure on average realized payment
rates, and a reduction in the number of patients under such plans, which may
result in the loss of revenues or patients, a reduction in government payment
rates under the Medicare ESRD program or other government-based programs, the
impact of the Center for Medicare and Medicaid Services (CMS) 2014 Medicare
Advantage benchmark structure, risks arising from potential federal and/or state
legislation that could have an adverse effect on our operations and
profitability, changes in pharmaceutical or anemia management practice patterns,
payment policies, or pharmaceutical pricing, legal compliance risks, including
our continued compliance with complex government regulations and current or
potential investigations by various government entities and related government
or private-party proceedings, including risks relating to the resolution of the
2010 and 2011 U.S. Attorney Physician Relationship Investigations, such as
restrictions on our business and operations required by a corporate integrity
agreement and other settlement terms, and the financial impact thereof,
continued increased competition from large and medium-sized dialysis providers
that compete directly with us, our ability to maintain contracts with physician
medical directors, changing affiliation models for physicians, and the emergence
of new models of care introduced by the government or private sector that may
erode our patient base and reimbursement rates such as accountable care
organizations (ACOs), independent practice associations (IPAs) and integrated
delivery systems, or to businesses outside of dialysis and HCP's business, our
ability to complete acquisitions, mergers or dispositions that we might be
considering or announce, or to integrate and successfully operate any business
we may acquire or have acquired, including HCP, or to expand our operations and
services to markets outside the U.S., variability of our cash flows, the risk
that we might invest material amounts of capital and incur significant costs in
connection with the growth and development of our international operations, yet
we might not be able to operate them profitably anytime soon, if at all, risks
arising from the use of accounting estimates, judgments and interpretations in
our financial statements, loss of key HCP employees, potential disruption from
the HCP transaction making it more difficult to maintain business and
operational relationships with customers, partners, associated physicians and
physician groups, hospitals and others, the risk that laws regulating the
corporate practice of medicine could restrict the manner in which HCP conducts
its business, the risk that the cost of providing services under HCP's
agreements may exceed our compensation, the risk that reductions in
reimbursement rates, including Medicare Advantage rates, and future regulations
may negatively impact HCP's business, revenue and profitability, the risk that
HCP may not be able to successfully establish a presence in new geographic
regions or successfully address competitive threats that could reduce its
profitability, the risk that a disruption in HCP's healthcare provider networks
could have an adverse effect on HCP's business operations and profitability, the
risk that reductions in the quality ratings of health maintenance organization
plan customers of HCP could have an adverse effect on HCP's business, or the
risk that health plans that acquire health maintenance organizations may not be
willing to contract with HCP or may be willing to contract only on less
favorable terms, and the other risk factors set forth in Part II, Item 1A. of
this Quarterly Report on Form 10-Q. We base our forward-looking statements on
information currently available to us, and we undertake no obligation to update
or revise any forward-looking statements, whether as a result of changes in
underlying factors, new information, future events or otherwise.

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The following should be read in conjunction with our condensed consolidated
financial statements.

Consolidated results of operations

We operate two major divisions, Kidney Care and HealthCare Partners (HCP). Our
Kidney Care division is comprised of our U.S. dialysis and related lab services
business, our ancillary services and strategic initiatives including our
international operations, and our corporate support expenses. Our HCP division
is comprised of our HCP business.

Our largest major line of business is our U.S. dialysis and related lab
services, which is a leading provider of kidney dialysis services in the U.S.
for patients suffering from chronic kidney failure, also known as ESRD. Our
other major line of business is HCP, which is a patient- and physician-focused
integrated health care delivery and management company.

Following is a summary of our consolidated operating results for the second
quarter of 2014 compared with the prior sequential quarter and the same quarter
of 2013, as well as the six months ended June 30, 2014 compared to the same
period in 2013, for reference in the discussion that follows.

(1) For the three and six months ended June 30, 2013, we have excluded $57
million related to an adjustment to decrease HCP's contingent earn-out
obligation. In addition, for the six months ended June 30, 2013, we have
excluded $300 million of expenses related to an estimated loss contingency
reserve. These are non-GAAP measures and are not intended as substitutes for
the GAAP equivalent measures. We have presented these adjusted amounts
because management believes that these presentations enhance a user's
understanding of our normal consolidated operating income by excluding an
unusual adjustment of $57 million for a decrease in HCP's contingent
earn-out obligation and an estimated $300 million loss contingency reserve
related to the 2010 and 2011 U.S. Attorney Physician Relationship
Investigations (see Note 9 to the condensed consolidated financial
statements). We therefore consider these adjusted consolidated operating
income amounts meaningful and comparable to our prior period results.

Consolidated net revenues

Consolidated net revenues for the second quarter of 2014 increased by
approximately $129 million, or approximately 4.2%, as compared to the first
quarter of 2014. The increase in consolidated net revenues was primarily due to
an increase of approximately $67 million associated with the U.S. dialysis and
related lab services net revenues, principally due to one and a half additional
treatment days in the second quarter of 2014 as compared to the first quarter of
2014 and strong non-acquired growth, partially offset by a decrease of $1 in the
average dialysis revenue per treatment mainly due to a seasonal decrease in
acute services. In addition, HCP's net operating revenues increased by
approximately $46 million, mainly from the recognition of additional HCP
revenues related to the maintenance of existing physician networks, additional
senior capitated members and the timing of revenue from its annual premium
reconciliation for senior capitated members which previously occurred in the
third quarter of 2013. The increase in consolidated net revenues was also due to
an increase of approximately $17 million associated with our ancillary services
and strategic initiatives revenues primarily from additional pharmacy revenues.

Consolidated net revenues for the second quarter of 2014 increased by
approximately $300 million, or approximately 10.4%, as compared to the second
quarter of 2013. The increase in consolidated net revenues was mostly due to an
increase of $103 million in the U.S. dialysis and related lab services net
revenues, primarily as a

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result of strong volume growth from non-acquired treatment growth in existing
and new centers and an increase of $1 in the average dialysis revenue per
treatment, driven by changes in the mix of our government reimbursements and an
increase in some of our commercial payment rates. The increase in consolidated
net revenues was also due to an increase in HCP net revenues of $126 million due
to acquired growth, an increase in senior capitated members in the second
quarter of 2014 and from the recognition of additional HCP revenues related to
the maintenance of existing physician networks, as well as the timing of revenue
from its annual premium reconciliation for senior capitated members which
previously occurred in the third quarter of 2013, partially offset by a
reduction in HCP's Medicare Advantage payments. In addition, the increase in
consolidated net revenues was also due to an increase of approximately $74
million in our ancillary services and strategic initiatives, mainly from growth
in our pharmacy services and in our international operations.

Consolidated net revenues for the six months ended June 30, 2014 increased by
approximately $514 million, or approximately 9.0%, as compared to the same
period in 2013. The increase in consolidated net revenues was primarily due to
an increase of $209 million in the U.S. dialysis and related lab services net
revenues, largely as a result of strong volume growth from non-acquired
treatment growth in existing and new centers, and an increase in HCP net
revenues of $163 million, primarily due to an increase in senior capitated
members in the first quarter of 2014 and from the recognition of additional HCP
revenues related to the maintenance of existing physician networks, as well as
the timing of revenue from its annual premium reconciliation for senior
capitated members which previously occurred in the third quarter of 2013,
partially offset by a reduction in HCP's Medicare Advantage payments. In
addition, the increase in consolidated net revenues was also due to an increase
of approximately $146 million in our ancillary services and strategic
initiatives, largely due to growth in our pharmacy services and in our
international operations.

Consolidated operating income

Consolidated operating income for the second quarter of 2014 increased by
approximately $43 million, or approximately 9.8%, as compared to the first
quarter of 2014. The increase in the consolidated operating income was for the
most part due to an increase in U.S. dialysis and related lab services net
revenues due to strong volume growth primarily from one and a half additional
treatment days in the second quarter of 2014 as compared to the first quarter of
2014, lower payroll taxes, improved productivity, as well as improved operating
results in HCP mainly from the recognition of additional revenues as described
above, and an increase in HCP senior capitated members. Consolidated operating
income was negatively impacted by an increase in pharmaceutical costs, an
increase in the intensities of physician prescribed pharmaceuticals, higher
labor costs, an increase in travel costs for management meetings, higher
long-term incentive compensation and an increase in HCP's medical claims expense
as a result of additional senior and Medicaid members who have higher
utilization.

Consolidated operating income for the second quarter of 2014 decreased by
approximately $38 million, or approximately 7.3%, as compared to the second
quarter of 2013, including the contingent earn-out obligation adjustment of $57
million in the second quarter of 2013. Excluding this item, adjusted
consolidated operating income would have increased by $19 million. The increase
in adjusted consolidated operating income was primarily due to strong volume
growth in the number of treatments from non-acquired growth and acquisitions,
and from improved productivity. In addition, adjusted consolidated operating
income was also positively impacted by improved operating performance of certain
ancillary services and strategic initiatives, mainly our pharmacy services, and
the recognition of additional HCP revenues as described above, partially offset
by the impact of lower HCP Medicare Advantage payments, an increase in HCP's
medical claims expenses as a result of additional senior capitated members,
higher pharmaceutical unit costs, an increase in the intensities of
physician-prescribed pharmaceuticals, an increase in the provision for
uncollectible accounts, higher labor costs and related payroll taxes, and higher
long-term incentive compensation.

Consolidated operating income for the six months ended June 30, 2014 increased
by approximately $237 million, or approximately 34.4%, as compared to the same
period in 2013, which includes the accrued estimated loss contingency reserve of
$300 million and the contingent earn-out obligation adjustment of $57 million.

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Excluding these items, adjusted consolidated operating income would have
decreased by $6 million. The decrease in adjusted operating income was primarily
due to the impact of lower HCP operating results, largely from lower Medicare
Advantage payments, partially offset by the recognition of additional HCP
revenues as described above. In addition, the decrease in adjusted consolidated
operating income was also due to higher pharmaceutical unit costs, an increase
in the intensities of physician-prescribed pharmaceuticals, an increase in the
provision for uncollectible accounts, higher labor costs and related payroll
taxes, an increase in benefit costs, higher long-term incentive compensation and
an increase in HCP's medical claims expenses, as a result of additional senior
capitated members. The decrease in adjusted consolidated operating income was
partially offset by strong volume growth in the number of treatments from
non-acquired growth, improved productivity and lower professional fees for legal
and compliance matters. In addition, adjusted consolidated operating income was
also positively impacted by improved operating performance of certain ancillary
services and strategic initiatives, primarily from growth in our pharmacy
services.

Dialysis and related lab services' net revenues for the second quarter of 2014
increased by approximately $67 million, or approximately 3.4%, as compared to
the first quarter of 2014. The increase in dialysis and related lab services'
net revenues was due to an increase in the number of treatments as a result of
one and a half

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additional treatment days in the second quarter of 2014 as compared to the first
quarter of 2014 and strong non-acquired treatment growth in existing and new
centers, partially offset by a decrease in the average dialysis revenue per
treatment of approximately $1. The decrease in the average dialysis revenue per
treatment was primarily due to a seasonal decrease in our acute services,
partially offset by an increase in our commercial mix and an increase in some of
our commercial payment rates.

Dialysis and related lab services' net revenues for the second quarter of 2014
increased by approximately $103 million, or approximately 5.4%, as compared to
the second quarter of 2013. The increase in net revenues in the second quarter
of 2014 was principally due to strong volume growth from additional treatments.
The increase in the number of treatments was primarily attributable to strong
non-acquired treatment growth at existing and new centers. The average dialysis
revenue per treatment also increased by approximately $1 in the second quarter
of 2014 as compared to the second quarter of 2013. The increase in our average
dialysis revenue per treatment was primarily due to an increase as a result of
changes in the mix of our government reimbursements and an increase in some of
our average commercial payment rates, partially offset by a decrease in our
commercial mix and an increase in the provision for uncollectible accounts.